China: Patents: Courts differ over online infringement jurisdiction
Which courts have jurisdiction over online sales or offering to sale of infringing goods is becoming a perplexing issue in today's China IP practice. According to some of the latest decisions, different courts take different positions with some valid reasons, especially among the three specialised IP courts in Beijing, Shanghai and Guangzhou. The Supreme People's Court has made some efforts, but no binding decisions have come out yet on this particular issue. It is important to monitor the development in this area closely and adapt to the changes in the patent enforcement strategy.
As background, generally speaking, China's jurisdiction in patent or other IP cases is quite flexible. Patent owners may file the lawsuits at the court where the defendant is based or at the court where the allegedly infringing goods are manufactured, sold, offered for sale or imported. The complexity relates to online sales, as there is a dispute as to whether the place of delivery could be counted as location of sales. Obviously, patent owners who wish to be more flexible with forum shopping want to sue at the place of delivery, but the defendants prefer to deal with the lawsuits at their home courts.
Courts in China now have taken very different views about this, probably due to the fast-growing e-commerce business. In the past, Chinese IP judges normally allow copyright owners to sue where infringing online content is found. But when it comes to trade mark and patent cases, judges start thinking differently. Among the courts, the Beijing Court, Guangzhou IP Court and Beijing Higher People's Court take one position, rejecting the use of the delivery place as the basis of jurisdiction. On the contrary, the Shanghai IP Court, Shanghai Higher People's Court, Guangdong Higher People's Court, Jiangsu Higher People's Court and Zhejiang Higher People's Court seem to accept it. In a decision related to online sales of design infringement goods issued by the Supreme People's Court in April 2016, the panel seemed to agree with the Beijing courts.
The reasoning behind the two schools of jurisdiction rule is interesting. In several cases related to online trade mark or patent infringement cases, the Beijing IP court refused to adopt the jurisdiction rules under the Civil Procedure Law Judicial Interpretation, which deals with the "information network infringement". The judges held that those rules in the civil procedure simply apply to where the stipulated right to dissemination of content over an information network (similar to right to distribute under the US laws or the right to make available under EU laws) is infringed. The judges pointed out that not all of the online infringement acts relate to distribution of content. When someone sells online a product that infringes trade mark or patent, this scenario is not covered by the current law. And the judges want certainty and predictability in such online cases. They believe that, as for patent litigation, the courts at the place of actual sale or the place of defendant's domicile will be in a better position to investigate the facts, make the determination and enforce the decision. If the delivery place could be the basis of jurisdiction, the defendants would always have to litigate in the home court of the plaintiffs, which is not considered by these courts as appropriate.
The Guangzhou IP Court shared the same view and stressed that in IP infringement cases, the delivery place shall not be construed as "the place of infringement act" nor "the place where the consequence of infringement occurs", both of which are the bases of jurisdiction in tort cases.
By contrast, the Shanghai IP Court and the courts in neighbouring provinces such as Jiangsu and Zhejiang take a different view. In a few cases involving online sales of trade mark infringing items, the Shanghai IP Court held that the place of delivery may be considered as the place where the consequence of infringement occurs. The Shanghai IP Court seems to be concerned that a plaintiff would end up with two options only – the defendant's home court or where the infringing goods are shipped, if the delivery place is rejected as the basis of jurisdiction. An overly narrowing rule, according to the Shanghai IP Court, would violate the current law which specifically grants jurisdiction to "the place where the consequence of infringement occurs".
The Guangdong Higher People's Court apparently agreed. Its reasoning is more straightforward. It said that a plaintiff is entitled to choose the forum if more than one court has the jurisdiction over an IP case under the current law.
Similarly, the Jiangsu Higher People's Court took the same view in a design patent case that the delivery place is the place of infringement act as the place where consequence of infringement occurs, thus establishing the jurisdiction.
The Higher People's Court of Zhejiang, where Alibaba is based, adopted the same result. It did not analyse what counts as the place where consequence of infringement occurs. In a recent decision issued in 2016 related to an invention patent, the court simply said that selling products online is an "act occurring in the internet environment" and therefore constitutes the act of the information network infringement, as defined in the jurisdiction rules under the Civil Procedure Law Judicial Interpretation. Therefore, the court at the place of the plaintiff's domicile has jurisdiction over the case.
The Supreme Court has touched on this issue in a design patent decision in 2016. The Supreme People's Court seemed to agree with the approach used by the Beijing IP Court, rejecting the jurisdiction over defendants. One of the reasons, as pointed out by the Court, is that patent infringement arising from online sales is not counted as "information network infringement act".
At present, the The Supreme People's Court has not indicated through other binding sources what should be the jurisdiction rules. There are signs that the Court may have to clarify this very soon, especially due to the differing practice among the local courts. Parties who seek to assert patent claims with more flexibilities need to analyse the current situation closely and make right moves, quickly.
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